NAFTA 2.0 Updates Exploitation

New deal based on the same flawed trade model that protects corporate interests

By Rick Telfer

On Sep. 30, after more than a year of negotiations, Canada and the United States reached an agreement to replace the North American Free Trade Agreement (NAFTA) with a new trade agreement: the “United States-Mexico-Canada Agreement” (USMCA).

The United States had reached an agreement with Mexico before completing negotiations with Canada.

Because many workers in the US felt that they had not benefited from NAFTA, or that they were directly harmed by it, Trump’s criticism of the agreement helped to propel him to victory.

NAFTA came into force on Jan. 1, 1994 after being negotiated and signed by Canada, the United States, and Mexico. It replaced the Canada-United States Free Trade Agreement (FTA) which had been in effect since 1988. With Mexico included, NAFTA established a trilateral trade bloc among the three countries and eliminated both tariff and non-tariff barriers to investment and trade.

Under NAFTA, most tariffs on goods traded between the three countries were eliminated, with a particular emphasis on agricultural products and automobile manufacturing.

The agreement also contained investor-state dispute settlement provisions – known as NAFTA’s Chapter 11 – which established a process for resolving disputes between countries and corporations. The process permits foreign businesses to sue states for damages when they believe that a government’s decisions have harmed them unjustifiably.

While the Canadian government claims that “NAFTA has generated economic growth and rising standards of living for the people of all three member countries,” the Canadian Centre for Policy Alternatives (CCPA) has argued that “On each of the proclaimed measures of success – jobs, productivity and market access – Canada’s trade deals with the United States (the FTA and NAFTA) have been disappointing.”

The CCPA has also criticized Chapter 11 of NAFTA, pointing out that “foreign investors have targeted a broad range of government measures in North America – especially in the areas of environmental protection and natural resource management – which allegedly adversely affected their investor rights.”

Furthermore, “Canada has been the most sued party under NAFTA, having been targeted in 39 claims” and Canada “has lost or settled eight cases, paying out damages to foreign investors of $215 million.”

During the 2016 US presidential election campaign, Donald Trump criticized NAFTA. He called it the “worst trade deal in the history of the world” and blamed it for the loss of US manufacturing jobs to Mexico because labour is cheaper there.

Because many workers in the US felt that they had not benefited from NAFTA, or that they were directly harmed by it, Trump’s criticism of the agreement helped to propel him to victory.

After being elected president, Trump announced in Apr. 2017 that he intended to withdraw from NAFTA. Under the agreement, a country must provide six months notice to withdraw. Soon after, Canada and Mexico agreed to negotiate a new free trade agreement with the US.

Negotiations with Canada were protracted, in part because Canadian negotiators were resisting the United States’ demand for greater access to the Canadian dairy market. They were also seeking to preserve investor-state dispute settlement provisions.

When it was announced that the United States and Canada had finally reached agreement – and that “NAFTA 2.0” would be named the United States-Mexico-Canada Agreement – watchdog and labour organizations in Canada were quick to respond.

The Council of Canadians – which was founded in 1985 as a major civil society critic of the FTA and, later, NAFTA – described USMCA as “better but still deeply flawed.”

The Council described it as “good news” that “Chapter 11 between Canada and the US is gone. The investor-state dispute settlement provisions that were in NAFTA 1.0 have allowed U.S. corporations to sue Canada for billions over policies and laws that infringed on corporate profits even if they were done in the public interest.”

Mexico, however, remains subject to the investor-state dispute settlement process.

Additionally, energy proportionality – which required Canada to send a set percentage of its energy resources to the US even in times of shortages – was eliminated.

The Council added that “Canada was able to retain the cultural exemption clause from NAFTA 1.0. And there are promising signs of improved labour standards too, including increased wages and collective bargaining freedoms for Mexican workers.”

While agreeing that the elimination of Chapter 11 was good news, Canada’s largest union was harsher in its criticism. The Canadian Union of Public Employees (CUPE), representing more than 665,000 workers, declared “NAFTA gets worse for Canadians under USMCA.”

Charles Fleury, National Secretary-Treasurer of CUPE, said “Mr. Trudeau made a great show about negotiating strong, enforceable chapters on gender, labour, indigenous rights and the environment. But when push came to shove, he has come up empty-handed once again.”

Of particular concern to CUPE was the fact that, under USMCA, patent protections for biologics were extended. Calling this “extremely disappointing,” the union is concerned that such protections will drive up drug costs “dramatically” and “threaten the viability of a national Pharmacare plan.

“The Liberals have talked a big game about Pharmacare and making life-saving medication more affordable for Canadians,” said CUPE National President Mark Hancock. “But behind the scenes they’ve been complicit in allowing the cost of prescription drugs to skyrocket, and extending patent protections doesn’t help.”

The Council of Canadians also lamented Canada’s capitulation to the US in regards to the dairy market. It stated, “Our farmers will pay a heavy price as NAFTA 2.0 opens Canada’s market to more U.S. dairy products, including products that contain bovine growth hormone (BGH), a genetically modified hormone that is injected in cows to make them produce more milk. BGH has been banned in Canada due to its link to serious health concerns.”

The Council also noted that, under USMCA, “[t]here will be increased deregulation and harmonization of rules to accelerate approvals for massive pipelines to be built.” This is a major obstacle to preventing climate breakdown, since oil pipelines encourage fossil fuel-burning instead of facilitating a shift to renewable energy sources.

Ultimately, the Council argues that the problem with the USMCA is that – like NAFTA before it – it is “based on a flawed trade model that protects corporate interests over people and the environment.” It does not address climate change “and it could still leave our water vulnerable to corporate interests that want to buy and sell it.”

The USMCA does not include any provisions on gender equality or Indigenous rights, either.

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